The United Arab Emirates (UAE) has positioned itself as a leading commercial hub, attracting multinational corporations, regional enterprises, and start – ups alike. With cross border transactions and high value contracts on the rise, dispute resolution has become a critical consideration for businesses operating in the region.

Two primary mechanisms dominate the landscape: litigation and arbitration. While both are firmly established under UAE law, businesses often show a clear preference depending on the nature of their operations, risk exposure, and strategic priorities.

So, what do businesses in the UAE actually prefer and why?

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Understanding the Legal Framework in the UAE

The UAE operates under a civil law system, with federal laws supplemented by local emirate level regulations. Litigation is governed primarily by the UAE Civil Procedure Law, while arbitration is regulated by Federal Law No. 6 of 2018 (UAE Arbitration Law), largely based on the UNCITRAL Model Law.

Additionally, common law jurisdictions such as the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) offer alternative court systems that further influence business preferences.

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Litigation in the UAE: When Businesses Choose Court Proceedings

Why Some Businesses Prefer Litigation

1. Cost Predictability for Smaller Disputes
   Court fees in UAE onshore courts are often fixed or capped, making litigation more cost effective for low to mid-value disputes.
2. Strong Interim Relief Powers
   UAE courts have wide powers to grant precautionary attachments, asset freezes, and other interim measures are an attractive feature when immediate enforcement is critical.
3. Familiarity for Local Businesses
   UAE-based SMEs and family owned enterprises often prefer litigation due to familiarity with local courts and procedures.
4. Clear Appeal Structure
   The multi-tiered court system (Court of First Instance, Court of Appeal, Court of Cassation) provides reassurance where parties want multiple levels of judicial scrutiny.

Limitations of Litigation

• Proceedings are generally conducted in Arabic, requiring certified translations.
• Court hearings may be relatively brief, limiting detailed oral advocacy.
• Public nature of proceedings may raise confidentiality concerns.
• Enforcement of UAE court judgments abroad can be challenging without reciprocal treaties.

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Arbitration in the UAE: The Preferred Choice for Large and International Businesses

Why Arbitration Is Often Favoured

1. Enforceability of Awards
   The UAE is a signatory to the New York Convention, making arbitral awards far easier to enforce internationally than court judgments.
2. Confidentiality
   Arbitration proceedings are private, a key consideration for businesses concerned about reputation, trade secrets, or sensitive commercial information.
3. Flexibility and Party Autonomy
   Parties can choose:
   • Arbitrators with industry expertise
   • Language of proceedings
   • Seat and procedural rules
4. Neutral Forum for Cross-Border Disputes
   International investors often prefer arbitration to avoid perceived “home-court advantage.”
5. Specialised Arbitration Centres
   Institutions such as DIAC (Dubai International Arbitration Centre), ADCCAC, and DIFC-LCIA-style frameworks enhance confidence in the process.

Challenges with Arbitration

• Can be costly, particularly in complex or prolonged disputes.
• Limited scope for appeal even in cases of legal error.
• Enforcement within the UAE, while improved, may still face procedural scrutiny by local courts.

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What Do Businesses in the UAE Actually Prefer?

The Practical Reality

• Multinationals & Foreign Investors
  → Strong preference for arbitration, especially seated in Dubai, DIFC, or abroad.
• High-Value Commercial & Construction Contracts
  → Arbitration is almost always the default dispute resolution clause.
• Local SMEs & Employment-Related Matters
  → Litigation remains common due to lower costs and procedural familiarity.
• Financial Institutions & Tech Companies
  → Increasing use of DIFC/ADGM courts, blending common law predictability with UAE enforcement.

In practice, many contracts now include multi-tier dispute resolution clauses, requiring negotiation or mediation before arbitration or litigation.

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The Rise of DIFC and ADGM Courts: A Hybrid Preference

An emerging trend is the use of DIFC and ADGM Courts, which offer:

• Proceedings in English
• Common law principles
• Internationally recognised judgments
• Direct enforceability within the UAE

For many businesses, this provides a middle ground between traditional litigation and arbitration.

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Conclusion: Strategy Over Tradition

There is no “one size fits all” answer. Businesses in the UAE choose between litigation and arbitration based on:

• Nature and value of the dispute
• Need for confidentiality
• Cross-border enforceability
• Cost considerations
• Speed and finality

While arbitration dominates large commercial and international disputes, litigation remains relevant and effective for domestic and lowernvalue claims. The UAE’s evolving legal ecosystem particularly with DIFC and ADGM ensures that businesses have sophisticated, globally competitive dispute resolution options.

Ultimately, the preference is not about choosing the “better” system but the one that best aligns with commercial objectives and risk management strategies.

Author’s Note: This article is intended for informational purposes and does not constitute legal advice.